An economist’s story

An economist’s story

I mentioned previously that I did not actually have a view on Gregory Mankiw’s appointment as chairman of Council of Economic Advisors. John Quiggin’s suggestion that I did, as well as an email from a reader suggesting (correctly) that I wasn’t really commiting to any substantive position on the supply-side debate, got me thinking about what economists do. Some (and I emphasize some economists worry about what questions like what will happen to GDP next quarter, and what effect tax rates have on the growth of GDP. They worry (professionally, not just personally) about whether the economy is in a recession, and whether it is going to come out of it. They think about fiscal policy, and they think about monetary policy. These sorts of economists are, broadly and loosely speaking, frequently (although I think misleadingly) called macroeconomists. Brad DeLong and John Quiggin are among them. [Don't read that as a straight-jacket or anything; DeLong for example has done some superb work in economic history.] I am not a macroeconomist. I mean really not. And therein lies a story about how people get into this business. If you are not interested in what economists do, you really, really, want to stop reading now.

I took my first class in economics in 1975, as a sophomore at the University of Chicago. The summer before, I read two little books by Robert Heilbroner, an economist at the New School for Social Research (these days renamed the more boring New School University), called Understanding Microeconomics and Understanding Macroeconomics. (They have since been turned into a big textbook coauthored by Lester Thurow of MIT.) I first read Understanding Microeconomics, and I remember, although I can’t find the book any longer, how it began. Heilbroner said that microeconomics may not seem appealling because it wasn’t about the big issues of the day: inflation, unemployment, national income (he turned out to be wrong about that, but that is a different story). But nonetheless, he assured the reader, it is very important for understanding much of what goes on in the world. He was surely right about that. I was captivated; I fell in love (yeah, yeah, big time geek alert). I can’t remember all his examples, and a lot of good ones were missing, but they were all about choices and opportunity costs. Things like: do you raise the minimum wage? What happens to incentives to hire employees, to train people, to the search for alternatives to employees (like heavy machinery)? The point wasn’t the policy conclusions. It was to emphasize that every choice carries with it a cost, that you always have to ask what are the alternatives, and that you don’t get to say “I want that” without asking what you are giving up. I remember thinking, if microeconomics is this exciting, macroeconomics must be spectacular, because Heilbroner said macroeconomics was where the real excitement is. Boy, was it a let-down. Maybe because Understanding Macroeconomics was early Phillips Curve stuff, or just badly written, I did not know, but I was bored. Microeconomics was clearly the exciting stuff, and I have never recovered. My first two courses in economics were the two-quarter intermediate microeconomics sequence. (In those days, Chicago did not teach principles: only intellectually prissy places like the Ivy League taught principles.) They were taught by Sam Peltzman and Ed Lazear (now at Stanford). Lazear was an extremely capable teacher, who made very messy things seem easy, and who was seemingly able to teach anybody almost anything. Peltzman, though, was extraordinary. It wasn’t merely that he was clear. He made economics seem real, about all sorts of real problems that you could tackle. It would be wrong to say we admired him. We thought he was a god. Peltzman is a New Yorker who pronounces “because” not the way most of us knew, as “bee-cuz”, but rather as “bee-caws”. So there were all these midwestern and west coast kids walking around like idiots, saying bee-caws, not caring that other kids laughed at us, because we were like our hero. If you took economics from Sam Peltzman, it was nearly impossible to think there was anything more interesting. Then macroeconomics hit. Two quarters of a post-doc with poor English, the kind of inept teacher that Chicago’s economics department was fond of dumping on its undergraduates. Before I left Chicago, I took two classes from Donald (now Deirdre) McCloskey, all about cool stuff like scattered plots and share cropping [here's a puzzle for you: why do people think "poor and down-trodden" when they hear sharecropper, who get a share of the gross, but think rich and successful when they hear an actor gets paid a share of the gross? It isn't an easy question.] I also barely survived Gary Becker, who terrified me (and still does). How could inflation compare to sex? GDP accounting has nothing on divorce (although in an economist’s mind, they are certainly connected).

In grad school at the University of Washington, I learned microeconomics from Stephen Cheung. He was a wretched teacher by any conventional measure. He never came to class prepared. What he did was walk into class and talk about whatever problem he was thinking about. [Why do all the good seat sell out first?] He was amazing. He used to say, in his heavy Chinese accent, “Economics so powerful, it scares me.” But macroeconomics was a disaster, to be gotten through. One of our teachers hated teaching so much, he nearly fell asleep in class. One day he was droning on, sitting in front of the blackboard, and decided he should draw a graph, but was too bored to get up, so he wrote on the board behind him. He never finished the diagram, because he dropped the chalk half-way through, and couldn’t be bothered to get up. My dissertation advisor, Keith Leffler, made his fame by giving an answer to the question, “Why do you sell cars with gorgeous girls and with Michael Jackson?” (and the answer really isn’t about sex).

So, chalk it up to the mix of teachers I had. Chalk it up to a perverse personality. But don’t ask me whether Greg Mankiw should be chairman of the CEA. I would rather figure out why a man that busy has four children.